Now that the House has passed an operating budget, the Senate gets its turn-- and Gov. Bill Walker is watching closely.

The Senate hasn’t formally received the budget bill, HB 286, and won’t until Wednesday, so tentative plans call for an afternoon hearing.

Senate Majority Leader Peter Micciche (R-Soldotna) says the Senate Finance Committee will focus on three things.

First, the Senate will decide whether to support a 7 percent increase of the unrestricted general fund budget passed by the House. This is about $4.5 billion, and this fund generates the most debate among the public and Legislature.

The Senate must also determine whether to let the House’s $1600 Permanent Fund Dividend stand. The House was split over this sum and a fully funded $2700. The lower amount prevailed after the $2700 figure held up budget negotiations.

“Legislators in the other body have been all over the place on the dividend size,” Micciche said. “We are going to take that $1600 and include that in our discussions and our decision making as we scrutinize the budget.

“With a higher dividend we’ll find other cuts and we’ll make it work in a way that hopefully we can reach resolution and be out of here in 90 days or so.”

Micciche also said the Senate must figure out how much of the permanent fund’s value to tap to pay for those dividends and state spending. There is still a $2.3 billion budget gap that must be filled, and for the first time in state history, the Legislature must look to earnings from the Permanent Fund.

The House proposed 5.25 percent, which Walker said was at the high end of the range he’d consider.

Micciche said nothing has been decided yet.

“We’re still evaluating how this works out between the two,” he said. “The dividend size matters. The draw amount matters.

“Again, our goal is to conserve and protect the Permanent Fund and the earnings reserve so that we can continue to not only paying out a healthy dividend but also having a percent of market value draw that’s going to keep all aspects of the draw healthy in perpetuity.”

Walker reiterated that the earnings draw is inevitable. Even that may not be enough. The Legislature may still need help from one of its savings accounts that requires a three-quarter vote from each chamber.

“Everybody in the Legislature is aware you have to use some of the earnings in order to help fund government-- a portion of it,” Walker said. “The key is you don’t draw more than the fund can generate and start to lose value in the fund.

“It’s delicate steps that need to be taken to make sure you don’t draw too much and therefore the fund starts to drop in value.”

The Legislature is down to two under two weeks if it plans to adjourn by the statutory 90-day limit.

Lawmakers can continue working through May 16, the 121-day limit under the Alaska constitution, without taking formal action. 

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